It is quite common that beginning real estate investors join with someone else to get started. Often someone with experience joins with someone with money, and a Joint Venture is begun. To avoid problems, it is critical that the person with cash only invest that cash in the deal using a loan note and lien on the property.
When two people form an LLC in which they intend to do business each person should put up the same amount of cash, say $1,000 each. All other investment funds should go into a specific property deal with a note and lien on the property. It takes money to run the LLC, and that money should come from the profits earned, not from the money needed to buy properties.
You might want to consider using one LLC for your flip and wholesale deals and use a separate LLC for buy and hold properties. I think your “buy and hold” rental properties should be titled in your own individual name or your LLC’s and not in a partnership. Long term partnerships require an extensive detailed partnership agreement and should be entered into with great care and forethought.
Example: Your newly formed LLC wants to buy a flip house. You need $30,000 cash in addition to the hard money loan to purchase and repair the house. You make up a note lending the funds to the LLC secured by the property you are buying. You will needed to subordinate this lien to the hard money lender so that they are in first lien position.
Now, when the house gets sold, the person putting in the cash will get a check at closing from the title company, with the remainder going to the LLC. After closing you and your partner can decide how to split up the net profit proceeds. In my company our splits where 1/3 for each partner and 1/3 to the company account to fund future growth opportunities.
Never, I repeat NEVER put money into a real estate deal without a lien on a specific property. That includes any extra cash you need to add because the project requires additional funds, and everyone else is broke except you, it is time for another loan note and another lien on that property.
The one exception is if you are the sole-owner named on the title. This sometimes happens when instead of using a LLC business format to do the flip, you are using a JV (joint venture contract). As long as the house is titled in the name of the person investing the money they are protected, (as much as one can be). When the house is sold the title company will pay the person on title, you don’t want to be in a position where to get your money back you will need to sue your partner.
Have your attorney draft up a, fill in the blank note form and lien form. Use them over and over and always file the prepared, signed documents the day you write the check. If you do not protect your cash you will be soon out of business.
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